Summer Shopping or Summer Sale?

Last week was again a bit of a bearish week for the entire dairy industry. With cream prices under pressure and milk intake still strong, we keep seeing a market that has more supply than demand. Butter prices took another step lower, cheese prices cracked, and the powder market gave back a bit of its gains again. Can this week be a trend reversal? ONIL is back with their tender, we have a GDT, and the pre-summer shopping should be starting right around now. Because traditionally, when the school holidays start, buyers want to be relaxed — able to enjoy their well-deserved break, physically but also mentally.

 

Traditionally, the weeks before summer come with a small rally, and that's not as strange as it sounds. Purchase directors and managers (and even some traders) have the habit of filling their entire pipeline right through to mid-September, so they can enjoy the summer break without having to buy anything on spot. And they can't really speculate on some last-minute buying either — running too light on stock means a factory could end up without product. So pre-summer shopping is almost a yearly returning event, and usually a bit of bullish one for most products.

But this is not a normal year. This year, the pre-summer shopping seemed to have been done back in February. Global warming is clearly making summer start earlier and earlier — although this might be a little extreme. It feels like most buyers have already left for their breaks. So this year, a pre-summer sell-off might just be the case. Sales managers have been waiting for the buyers to show up with their shopping bags, but they might be waiting for the wrong buyers. The only ones still out there are shopping for discounts, or skipping this year's summer shopping altogether.

Now, let's not get too bearish about it. A lot of sellers have the luxury of simply putting their product in the warehouse. At some point the buyers will come back, right?... right?... right??? From what we can see, though, sellers are already sitting on stock from the previous 2025 summer sell-off they didn't want to let go of, plus some stock from the winter sell-off that wasnt wanted as much as usual. The question is: how long do you keep adding to the pile? As my former boss once told me, we are running a dairy company, not a museum.

ONIL IS BACK

One of the pre-summer shoppers we were expecting actually did show up yesterday — but their interest isn't in summer goods, it's winter coverage. Arrival in Q4 is far-out demand, which leaves some sellers a little disappointed, as they were hoping to move those close-by warehouse stocks instead.

Still, ONIL usually brings a bit of bullish momentum to the market, and with tomorrow's GDT in place, who knows what sentiment can do. Although, looking at the CME... probably not that much. Prices continue to trade lower in the US.

GDT: Correction Expected

This week is also another GDT week. With this week's tender moving into a bit more supply than the previous one, we might see that effect come back in the sentiment — or not?

Looking at butter first, we are expecting a correction. With NZ fat it's always a surprise what will happen, but futures are pointing lower again. That fits a market — both in Europe and the US — where demand for fat just isn't that strong.

Solarec butter prices are expected to slide, although they overperformed our expectations a little in the previous event. For this tender we expect Q3 prices to average out around €3,750, but maybe even up to €3,800 if a few buyers are fighting over the same goods. Irish prices should trade around €3,650; much higher than that would surprise us.

But the biggest surprise would be if DMK butter actually trades. Looking at where their starting price sits for this tender — $4,900 — we wonder why they even participate. All the other products start with a lower price to let the market bid them up to fair market value. We wonder if DMK hasn't got much faith in the GDT system to get them the best price, or if the team at DMK simply doesn't want to sell. But if you dont want to sell? Why offer? And why does the GDT let them? We noticed the same strange price setting at the last tender, and we wonder why GDT doesn't motivate them to actually take part with a more relevant market price.

Looking at PowderMarket and the futures, we would normally be expecting a small correction. But with the GDT auction landing just after the ONIL announcement, we might see a bit more bullish momentum. Then again, with the demand being so far out, prices should still land lower than the previous tender. The same goes for WMP — we expect a slightly more bearish outcome.

On mozzarella we're holding our outlook stable. Cheese prices did break down hard last week, but mozzarella, for some reason, is holding up much better than gouda, cheddar and Emmental.

Overall, we feel the GDT result should come out bearish, somewhere between 2–3%.

Butter: Bearish until Bullish

For the butter market we remain... no surprise here, bearish. We continue to see lower levels for cream (this week already around €3,750 DAP Western EU), and with old product still around and more and more fresh butter being added to the market (in Germany, week 23, +19%), we just can't get bullish. At some point we will get bullish, but just not now. 

The previous four weeks have taken Q3 prices from €4,050 to €3,650, Q4 prices from €4,300 back down to €3,900, and Q1 prices from €4,500 to €4,100. The spot market keeps following the trendline we posted last October — for reference, we've added it back into this report. And although we keep saying this forecast is too bearish (we can't see butter trading below €3,000), we still expect the market to test the €3,000 level for older, less easy-to-place butter over the next few weeks. So far the market has traded near (roughly € 150-200 premium) the forecast line on spot almost the entire year, with a few weeks in february excluded.

A final note.

Yes, it's a bearish report — again. But let's not let the market ruin the mood. The sun is out, the school bells are about to go quiet, and even a market this oversupplied can't cancel summer. The bulls aren't gone; they've just packed their bags a little early this year. Give it a few weeks/months: the warehouses will empty, the buyers will come back from the beach with an appetite (and an empty pipeline), and somewhere a sales manager will finally get to say "I told you so." The only question we have, will they be able to this year? Or only after summer next year?

Until then, do what the buyers are doing — clear your position for the next 2 months and close the laptop, pour something cold, and enjoy the break. Physically, but also mentally. The market will still be here when you get back. It always is.

GFD, good trading 🤝